We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

US-China antitrust relationship deepens

On December 18 2014 US Secretary of Commerce Penny Pritzker announced that China has agreed to improve enforcement of its Anti-monopoly Law in order to provide greater predictability, fairness and transparency for foreign companies operating in China. Specifically, Chinese antitrust regulators have vowed to:

enforce the Anti-monopoly Law fairly and equally;

publish the results of their administrative proceedings; and

permit foreign companies to be represented by counsel during administrative proceedings.

Chinese antitrust commitments in JCCT

The announcement was made following a meeting between Pritzker, US Trade Representative Michael Froman and Chinese Vice Premier Wang Yang during the US-China Joint Commission on Commerce and Trade (JCCT) held in Chicago from December 16 to 18. The JCCT is a forum for high-level dialogue on bilateral trade issues between the United States and China.

The Chinese government made several commitments that will affect foreign industry concerns. Most importantly, China will allow local counsel to participate in meetings with antitrust enforcement agencies without restriction. Qualified international counsel will also be allowed to participate, subject to approval by the relevant enforcement agency, "which shall be granted as normal practice". To a large extent replicating existing rules in China, the Chinese side also stated that before imposing any penalties, the antitrust enforcement agencies will:

"notify the parties of the facts, grounds, and basis according to which the administrative penalties are to be decided, notify the parties of the rights that they enjoy in accordance with the law, and provide the parties with the right to state their cases and to defend themselves."

In addition, all penalty decisions "will be provided in writing to the party and include the facts, reasons, and evidence on which the decision is based". Finally, China committed that any antitrust remedies would "address the harm to competition" rather than "impose enforcement measures designed to promote individual competitors or industries".

As part of the JCCT deliverables, China also agreed to pay special attention to the pharmaceuticals and medical device industries, promising less red tape and faster entry to market for new products. IP rights will also be better protected and more fairly treated, with China promising to develop a new trade secrets law and better promote the sale of foreign IP-protected goods and services.

These commitments in the JCCT framework have come amid increased criticism from US officials that China is disproportionately targeting its enforcement of the Anti-monopoly Law at foreign-owned businesses. Many large foreign companies have been fined millions of dollars for alleged violations of the Anti-monopoly Law. President Obama reportedly raised this issue during his visit to China in November 2014 and the head of the US Department of Justice Antitrust Division, Bill Baer, has encouraged other countries to "commit to making enforcement decisions based solely on competitive effects and consumer benefits". Most pointedly, the Federal Trade Commission's Maureen Ohlhausen expressed her concern directly in a recent speech over:

"what appears to be a significant ramp-up in Chinese antitrust enforcement, including against Western companies, which has brought into stark relief many differences between the Chinese regimes and others in the world."

The US push for commitments at the JCCT level is illustrative of a broader trend within the US government to raise antitrust issues in forums that are higher-than-a bilateral dialogue between US and Chinese antitrust agencies. Indeed, the push in recent months to bring antitrust on the bilateral US-China agenda on a more political level may have been driven, in part, by US trade officials. The meeting at the World Trade Organisation (WTO) for China's trade policy review in July 2014, in which the United States and other countries asked a number of pointed questions about China's enforcement of the Anti-monopoly Law, shows that the US side increasingly sees a relationship between antitrust enforcement and trade issues.

However, unlike in the WTO, commitments made within the JCCT framework are not subject to an international dispute settlement mechanism. Hence, while China's JCCT commitments on antitrust enforcement are certainly welcome, it remains to be seen how they are implemented in actual administrative practices in China. Given the high publicity of the commitments, the Chinese authorities may find it hard not to follow through. In any event, it is likely that companies involved in Chinese antitrust procedures to refer to the JCCT commitments.

Comment

In the coming months and years, the US-China interaction in the antitrust field is expected to continue, both through high-level dialogues and at the antitrust agency level.

China has a different legal, administrative and judicial system from the United States, and an antitrust procedure before a Chinese antitrust authority cannot be expected to mirror a US procedure. Even after the Anti-monopoly Law has been in force for six and a half years, progress in China will be gradual.

Nonetheless, the increasing level of government-to-government interaction can only be of benefit for companies doing business in China, as antitrust enforcement will remain in the spotlight and such interaction can lead to better understanding and learning on both sides.

Logan M Breed, Adrian Emch, Jun Wei

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.